How to find a Fiscal Sponsor
What is fiscal sponsorship?
Fiscal sponsorship is a formal agreement that allows independents/freelancers to work with an existing 501(c)(3) organization as a pathway to grants and recognizing charitable donations as tax-deductible. For many independent podcasters, projects, and audio producers this can be the support needed to advance their work. Fiscal sponsorship is a mutually beneficial agreement, allowing the independent to focus on creating and growing their project rather than being bogged down by red tape, documentation, and the extended time it takes to engage 501(c)(3) status as a newly formed organization. In exchange for a fee to cover their cost, Fiscal sponsors can take on a number of duties including but not limited to bookkeeping, operations, helping the project retain IRS compliance, and or a variety of administrative services. This also gives the project faster access to fundraising opportunities, relevant grants, and launching programs. Most importantly, private foundations tend to require grantees to be recognized as tax-exempt by the IRS, making fiscal sponsorship an attractive alternative to the long process attached to gaining non-profit status.
If you’ve never even heard the term, some excellent starting points include:
- Candid was formed in 2019 when Foundation Center Online and GuideStar merged. They maintain a directory of grant opportunities, and their article, Find a Fiscal Sponsor that Fits is a great place to start.
- LION’s Newsletter https://www.lionpublishers.com/5-tips-for-choosing-a-fiscal-sponsor-for-your-newsroom/
- Foundation Group CEO Blog: What is a Fiscal Sponsor? By Greg McRay, EA, Founder & CEO
- Fiscal /sponsorship Directory- What is Fiscal Sponsorship?
- Synopsis: The Basics of Fiscal Sponsorship summarizes the evolution of “fiscal sponsorship” by Gregory L. Colvin and Stephanie L. Petit
- Summary and Chart of the Models outlines the different models of fiscal sponsorship, from those structures with the least financial independence from the sponsor to the model with the most financial independence
- Fiscal Sponsorship: A Balanced Overview from NonProfit Quarterly gives a solid overview of considerations for the fiscal sponsor and the project seeking sponsorship
How much support do you need? Detailing models of fiscal sponsorship
Knowing how much support your project needs is essential to choosing an appropriate fiscal sponsor and building a successful relationship. Some fiscal sponsors will handle all of your administrative oversight, while others are very hands-off. Depending on your own capacity one or the other might be the better option. And a fiscally sponsored project can be a whole mission-driven newsroom that just hasn’t completed the 501(c)(3) process yet or a single charitable project that an otherwise for-profit company wants to undertake. So it makes a big difference to understand the model of fiscal sponsorship that you’re looking at and what works best for your project or program. According to Fiscal Sponsorship: 6 Ways to Do It Right, there are 6 models of fiscal sponsorship that pass IRS scrutiny and can be used to grow or expand independent projects or programs. They’re typically identified by letter ( A, B, C, D, L, & F are the current models). Models A and C are the ones we see most commonly in our work.
Model A (DIRECT PROJECT) is a comprehensive fiscal sponsorship and the most tangibly supportive. Under this model, the project being sponsored is housed under the fiscal sponsors' roof. The sponsoring non-profit manages any contracts and invoicing, as well as any hiring necessary to complete the project Model A is the best choice for a new project that needs accounting, HR, and administrative support. For a fiscal sponsor, the obligations in a direct project are identical to the obligations they would have for the regular operations of your organization.
Model C (PRE-APPROVED GRANT RELATIONSHIP) is what most people think of when they picture fiscal sponsorship. The sponsoring organization offers some oversight to ensure that funds are used appropriately, but the work is actually handled by a separate organization. This model is best for organizations or projects that have reasonable administrative capacity but don’t have 501(c)(3) status. In this case, the fiscal sponsor does not serve as a direct participant, but rather an overseer. Their main responsibilities include collecting and managing charitable funds. The fiscal sponsor underwrites charitable projects by accepting grants on their behalf and then distributing funds back to the project.
How to Find a Fiscal Sponsor
If you already know that you need a fiscal sponsor, where do you start looking for one?
Start with the network you already have. Take the time to connect with organizations you trust to see if they know of and are part of an organization that would willingly fiscally sponsor a charitable project that aligns with their own mission and values. Nonprofits with similar missions tend to make the most effective partners in growing a program or a project.
Look at professional associations and institutions you are already involved with. Lots of organizations, including AIR, are able to fiscally sponsor projects.
The Fiscal Sponsor Directory is another great place to start. With a growing list of organizations that are prepared and willing to serve as fiscal sponsors. Projects interested in fiscal sponsorship can use the directory to refine possible fiscal sponsors by name, region, state, or service category. They keep up-to-date information on 501(c)(3) status, fees, and mission or categorical alignment.
It’s important to know what you’re looking for in order to build a successful relationship with a fiscal sponsor. While they are bringing a wealth of opportunity to the table, due diligence is necessary where any formal agreement is being put into place. Most important is current non-profit status and compliance with the IRS. Without these in place, a fiscal sponsor cannot provide the support independent podcasters, projects, and audio producers are looking for. How the fiscal sponsor operates its own organization is a direct reflection of the quality of support you will receive. Quality fiscal sponsors will have a few things in common including healthy financials, which inspires trust in their ability to adequately support a charitable project or program-Other areas to explore include reasonable fees in relation to services provided, mission alignment, a documented history of engaging in fiscal sponsorship, a comprehensive agreement, and a clear understanding of their legal obligations expected in their role.
AIR has a fiscal sponsorship program, and there are a few other organizations that AIR’s members and community have had good luck working with: